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Personal Injury For The Bankrupt

Can filing for bankruptcy affect my personal injury claim? Absolutely; money you receive from a personal injury settlement is up for grabs when you file for bankruptcy. However, if you work in unison with both your personal injury attorney and bankruptcy attorney, there is a possibility that you can keep a good portion of your settlement. The timing associated with filing and the type of bankruptcy process you choose can all affect the fate of your personal injury settlement.

When were you awarded the settlement?

Timing is very important when considering how much of a personal injury settlement one can keep during bankruptcy. For this reason, it is very important to hire a personal injury attorney and a bankruptcy lawyer who have good communicative skills and can work together to ensure you get to keep the most of your settlement. If both attorneys work in unison, they can schedule events to occur in an order that is to your advantage.

If you won your personal injury settlement before filing for bankruptcy, this compensation could be taken by your bankruptcy trustee to pay off creditors. On the other hand, personal injury settlements won after filing for bankruptcy are not so certain–most of the time it is protected for you to keep.

How much will I get to keep?

Every state has their own list of pre-bankruptcy exemptions–assets that are excluded from the bankruptcy estate. It depends on the state you live in whether your personal injury settlement won before filing for bankruptcy is protected–but for many states, like Texas, pre-bankruptcy settlements are available for creditors to recover. For federal bankruptcy cases, the entirety of pre-bankruptcy settlement assets cannot be taken to pay creditors, but instead it is protected for the bankrupted person to keep (a person can keep up to $30,000). The good part is, a person filing for bankruptcy can decide if they wish to follow state or federal exemption rules.

If you are awarded a personal injury settlement following filing for bankruptcy, your new asset is for the most part for you to keep. Though it should be discussed with your bankruptcy lawyer, your bankruptcy trustee nor your creditors have access to your personal injury settlement when it is awarded after filing for bankruptcy. Although, it might be a good idea to use this to start paying creditors, if at all possible.

Sounds too good to be true?

If you filed for Chapter 13 bankruptcy, you will most likely have to use a portion or all of your personal injury settlement to pay creditors. Why, you ask? Certain bankruptcy payment plans require you to proceed under good faith principles, and this would most likely require you to use part of your personal injury settlement to go towards paying off debt. This is something to discuss with your bankruptcy attorney because it truly varies from case to case and state to state. The circumstantial nature of filing for bankruptcy can make this process very complicated and confusing–for this reason it is very important to hire professional and experienced attorneys.

Kristen Valek blogs for Alamo Injury Attorneys, a San Antonio-based law firm located in the Lone Star State. Kristen has never filed for bankruptcy.Ā 

Tim Esterdahl

Tim Esterdahl is the editor of IFCS blog. He is a married father of three and enjoys golf in his spare time.

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